ASX 20 represents the largest 20 companies listed on the Australian Stock Exchange. Like other ASX indices, S&P/ASX 20 is a market capitalization index in which the individual companies’ size in the index is based on its size relative to all of the companies in the index.
Top 20 ASX Companies
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The list shows that to qualify to be included in the S&P/ASX 20 index, the company’s equity value must be greater than $10 billion. The average size of the companies in the index is around $30 to $40 billion, but it is weighted towards large and mega caps stocks.
The list of the index companies is the definition the most well known and largest companies in Australia.
ASX 20 Index Fund
Blackrock provides investors a low cost index fund option, iShares S&P/ASX 20 ETF (ASX:ILC) to track the index’s performance. The advantage of the ILC exchange traded fund is the low management fee is on 0.24% per annum and daily liquidity so it is an efficient means of exposure to a portfolio of 20 biggest companies.
As most of the companies’ earnings in the index are sourced from Australia, the dividends paid are consistently 80% to 90% franked. This means that the real distribution of ILC should have a higher level of franking credit than broader market indexes like ASX:STW (ASX 200 index fund).
ASX ILC Fund Summary
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LTM = Last Twelve Months
LTM Yield = Last 4 quarters of dividend payments
Since ASX ILC tracks the S&P/ASX 20 index, the historical 12 month dividend yield is equivalent to the market index.
ASX 20 Sector Weighting
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Limited Diversification
One of the major issues investing in the Australian market is local market is highly concentrated and offers limited diversification. The ASX Top 20 is a good representation of this as 2 sectors, financials and resources, dominate it. Almost 50% of the index is made up of these 2 sectors.
The remaining sectors in the index are made up of single company exposures from Telstra, health by CSL and Energy by Woodside.
While investors should be aware of the index’s concentration, the rate of concentration decreases with the increase in the number of companies as the large companies’ weights are gradually diluted.
This is true even though companies in the ASX20 and ASX50 are overlapped with ASX20 companies included in the ASX 50, and those that are in the ASX 50 are included in the ASX 100 and so on.
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While the larger market indices are weighted towards these two sectors, this is reduced once you have an index with the largest 300 companies.
ASX 20 Dividend Yield – ASX ILC Dividend History
Dividends are paid quarterly in January, April, July and October.
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